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Stocks Pummeled by Eurozone, Fiscal Cliff Worries

Thursday's economic data was mostly positive. The Census Bureau said the U.S. trade deficit narrowed to $41.5 billion in September, down from the previous deficit figure of $43.8 billion that was revised from $44.2 billion. A trade deficit of $45 billion was expected for September.

"There were good economic numbers today," said Peter Cardillo, chief market economist at Rockwell Global Capital. "The trade deficit shrank as opposed to showing an increase. Narrowing bodes well for economic activity this quarter."

"Psychologically the market is going to take some time to repair yesterday's damage ... the next four or five days before we begin to consolidate," he added. "The market is focused very much on the fiscal cliff right now. I'm looking at some kind of agreement on the extension of tax cuts -- more or less another patch job. Eventually it will be worked out. In the meantime, the market is going to be subject to that fear factor of the fiscal cliff, and of course Europe."

Also, The Labor Department reported that initial jobless claims for the week ended Nov. 3 fell by 8,000 to a less-than-expected 355,000 from the previous week's unrevised figure of 363,000. On average, economists were expecting the figure to rise to 370,000.

"This is hard to read ... claims we dismiss as Sandy impacted and so are likely to rise in weeks to come," noted David Ader, a strategist at CRT.

The four-week moving average was 370,500, an increase of 3,250 from the previous week's unrevised average of 367,250.

Overseas, the European Central Bank stood pat on its benchmark interest rate of 0.75% Thursday amid deepening concerns about the eurozone economy and as Spain continued to refrain from requesting a bailout that would trigger ECB bond-buying.

"While the ECB apparently stands ready to buy peripheral governments' bonds, President Mario Draghi gave little assurance on Thursday about when it might start or how many it might purchase. He also ruled out writing off any of Greece's debt and gave no firm indication of any other policy support to come," said Jennifer McKeown, an economist at Capital Economics . "In all, we think that the press conference was somewhat disappointing."

As expected, the Bank of England held off on additional quantitative easing for now amid some recent upbeat economic data, though more stimulus looked to be a possibility in the near future amid doubts of a sustained economic recovery.

The U.K. Monetary Policy Committee decided to keep the key interest rate at a record low of 0.5% and the size of the bond-buying program at 375 billion pounds.